Oil Prices Extend Losses as Strait of Hormuz Talks Gain Momentum

Oil prices extended their losses on Thursday as investors grew more optimistic about talks to ease supply disruptions from the Middle East war. The Strait of Hormuz, a crucial waterway for global oil shipments, may reopen after Iran and Qatar agreed on how to share its revenues.

The agreement, which is still being finalized, could increase oil flows by up to 25% compared to pre-war levels. Brent crude futures fell 60 cents, or 0.7%, to $87.24 a barrel, while West Texas Intermediate crude futures dropped 56 cents, or 0.7%, to $81.67.

Qatar's prime minister is set to visit Iran on Thursday to relaunch diplomatic talks and end the six-month-old conflict. The U.S. has halted its attacks on Iran for about a month, but concerns over oil shortages persist.

ANZ senior commodity strategist Daniel Hynes noted that while the prospect of the Strait of Hormuz reopening improved, concerns over oil market shortages remain. He also pointed to the impact of the Middle East war and Russia-Ukraine conflict on diesel markets, with distillate stockpiles reaching a record low.